Just had an annoying issue pop up on an appraisal one of my agents commissioned and thought I would share.
This is a deal where we are representing the buyer of a somewhat run-down fourplex in an improving area.
The buyer intends to spend some money upgrading the property post closing.
However, the appraiser is causing problems. He is insisting that the units be brought up to “average” condition prior to finalizing the appraisal and allowing the loan to close.
When we inquired as to the specific criteria, his answer was, basically: “Make them rent-ready.”
Here’s why that’s so insane: The tenants in these apartments are protected by rent control. Their rents are easily 20-30% below market. There is no way these people are moving out. And, if they did, the owner would have to be insane not to spend the dough to upgrade them and get market rents.
From the bank’s perspective, this is literally one of the safest loans it could make, because the rent will come in from those units like clock-work (if they don’t pay, the tenants can be evicted and lose those sweet under-market rents).
But, since the bank’s chosen appraiser doesn’t understand the asset he is appraising, we are having to jump through all kinds of hoops to get the loan closed.